What Obamacare Means For Millennials: More Fees, Fewer Choices

Today, the much anticipated Obamacare exchanges opened in nine states, just as our government shut down (how fitting). Most young adults haven’t a clue as to what will ensue.

The Patient Protection and Affordable Care Act, also known as Obamacare, aims to alleviate the skyrocketing costs of health care while broadening coverage and guaranteeing it for more Americans than ever.

Before Obamacare, Americans already paid far more for health care than any other country in the world. Businesses would cover health insurance costs with their own respective plans for their employees. Insurance was available for private purchase as well. Insurance companies could deny consumers health care due to preexisting conditions. Coverage costs varied based on specific coverage amenities, taking the individual into consideration, by adjusting premiums to their patients.

In order to further the law’s mission of securing universal health care coverage, Obamacare imposes perverse incentives for Americans to pour even more money into our broken health care system. Some of the specific terms of Obamacare that will hit young adults the hardest include:

1. A new definition of full-time. Here, noble motivations bring about devastating consequences. In an attempt to force businesses into covering their employees and providing quality care, Obamacare classifies employees who work 30 hours a week as “full-time.” Obamacare requires businesses with 50+ employees to provide health insurance for their employees. Businesses with 50 or more employees are then penalized, per employee, should they not provide such care. What happens next? Businesses will find sufficient employee hours by employing fewer “full-time” workers. Therefore, we can expect to receive more offers of part-time work without health benefits in place of full-time, entry-level jobs.

2. Penalties on penalties on penalties. As mentioned above, Obamacare penalizes what it deems to be “large companies” $2,000 per uncovered employee. The penalty inflates to $3,000 if the employee receives tax credits to purchase health insurance in an ACA exchange market. The difference between 50 employees and 49? Up to $150,000 in taxes. What happens next? Expect to see more and more small businesses that stop hiring at 49 workers unless and until they are confident of profits outweighing the increased cost.

3. Government-knows-best mentality. The Affordable Care Act establishes a threshold called “essential coverage.” If a health insurance policy does not fall within the parameters of what the law deems “essential,” it cannot be sold in the exchanges created by the law.

Like most students, I am on a parent’s employer’s plan and will not be buying insurance on the exchange. But Obamacare’s “essential coverage” standards may not coincide with my parents' plan. It's true that the requires coverage for "adult children" up to age 26, but while this may allow millennials to remain on their parents' plans for another few years, our parents’ plans may be forced to offer different coverage with different pricing. Abandoning the employer plan, we'd be left to the mercy of the severely flawed exchanges. Obamacare hurts not only those who already have employer-provided insurance but also those who will be shopping on the exchanges.

So, what are our options? Post-graduates likely to be working relatively low-paid jobs once they have graduated will be presented with two choices. Obamacare requires you to pay for coverage, somehow, or pay a penalty. Though according to the National Center for Public Policy Analysis, we will actually save money by paying the penalty and forgoing insurance, I think most young adults will not want to pay a penalty for being uninsured (even if that is an economically rational choice). But with Obamacare’s guarantee that insurance will be available without the risk of rejection for pre-existing conditions, it may well be the rational choice to remain uninsured until a person has a health condition that needs treatment.

Nevertheless, once I graduate, I do not plan on paying thousands of dollars in penalties just to be uninsured. The more likely choice is buying into the cheapest possible plan: Medicaid. With no premium, Medicaid may be the most likely option for college graduates. Ironically, this massive law, initially written to cover everyone, will now force Americans out of options.

Obamacare is ultimately a bet. If, and only if, millions of young adults pay into the system — a system in which healthy, young adults pay for sick, old adults — will costs be covered. Although I would be likely to buy insurance, if I were currently independent from my parents, I would either be hoping for a full-time job with a good health insurance plan, which Obamacare will make harder to find, or buy one of the cheapest plans, which may not provide the subsidies that the Obamacare proponents are counting on to keep the law solvent.